Research Discussion Paper – RDP 9304 Exchange Rate Pass-through: The Different Responses of Importers and Exporters
May 1993
Abstract
This paper examines exchange rate pass-through for the prices of both imports and manufactured exports. It is found that, in the long run, exchange rate pass-through over the docks is complete for both classes of good. However, in the short run, responses to currency movements differ significantly. Differences occur with respect to the speed of pass-through and its pattern over time. Pass-through to import prices is found to be more rapid than that to manufactured export prices. However, evidence is presented of a recent and substantial increase in pass-through to manufactured export prices, in keeping with increased international integration. Conversely, existing patterns of exchange rate pass-through to import prices are found to accord with historical experience. The implications of this are discussed with respect to the balance of payments and inflation.